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Russia Pharmaceuticals and Healthcare Report Q2 2009 - a new market research report on

As Russia's economy slows painfully over the course of 2009 and the devalued rouble makes imports more costly, the pharmaceutical market will experience a double-digit US dollar loss, following eight straight years of robust growth. There is disagreement as to how much the Russian economy will shrink in 2009. BMI believes it will, by 4.0%, while official forecasts see a 2.2% fall. As bad as 2009 looks, BMI forecasts compound an average annual growth rate (CAGR) of 5.62% in US dollar terms for the period 2008 to 2013, with growth hitting 18.7% in 2011 on the back of a broader economic recovery and expected uptick in commodities prices.

Russia's government is relying on financial stimulus and the strength of the countrys stability fund, put aside during the recent oil price boom  to see it through the worst of the crisis in 2009 and cover the country's budget deficit. Quixotically, but perhaps effectively, at the beginning of the year the government published a list of companies that were system forming or critical to the economy, which included a handful of key pharmaceutical-sector companies. Also critical for the industry is that thus far the banking system, a long-term weak point in the economy, is still functioning, even if credit is scarce.

The rouble has devalued, but the government's risky defence of the currency and its managed devaluation during Q109 has worked  for now.

In the healthcare sphere the government has sought to reassure an increasingly restive population, and a statement by President Dmitry Medvedev in March stated that it will continue to deliver on healthcare and social-sector reforms, although cash strapped regions have threatened to pull out. These reforms include the new mandatory medicines insurance programme promised by 2010, designed to provide the first comprehensive medicines coverage for the wider population since the Soviet era. The state is also seeking to extract cost savings through such measures as delaying tenders for medicines under the supplementary medicines scheme (DLO) and, in March, threatening new price controls on essential medicines. In a more sinister move, the government warned local market monitoring firm DSM that it could be violating the law by forecasting future price rises on medicines, as official statistics measured a 5.2% increase in average medicines prices in February.

Among companies, the Pharmacy Chain 36.6 group has attracted the most headlines recently. As the largest retail pharmacy chain it has now moved to cut out distributors and go directly to major suppliers to control costs. This follows a high profile spat with distributors SIA International and Protek over payment terms. Meanwhile, the group's Verofarm production asset, with a strong generic oncology as well as plasters franchise, has attracted at least five bidders, including Germany's Stada  as its longawaited sale could net US$230mn. Local producer Valenta indicated it would sell a stake in its business to fund further production. Among foreign players, Gedeon Richter has said that it is providing financial aid to local distributors in both Russia and Ukraine to help them through the crisis.



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